U.S. to monitor South China Sea, talks with Australia on regional defense (Reuters)

Overnight Media Digest

WSJ

* Islamist extremists who have overrun swaths of Iraq made a rare retreat in an area hit by U.S. air strikes and gave up some territory they had won from Kurdish forces, in an early sign of impact from the three-day-old American campaign. (http://on.wsj.com/1kvlfam)

* Israel's early failure to detect the vast Hamas tunnel network that its forces destroyed in Gaza is triggering a wave of recriminations within the country's security and political establishment. (http://on.wsj.com/XV52Bh)

* Alaska, the state which staked most of its economy on energy in the 1970s after oil was found on the North Slope, is now competing with, and often losing out to, places with hotter oil fields-especially North Dakota. More people left Alaska than settled in the state between 2012 and 2013, while North Dakota added residents, according to state and federal census data. (http://on.wsj.com/1vw7n4B)

* Kinder Morgan Inc is consolidating its vast oil-and-gas pipeline empire into a single company amid investor worries about the enterprises' growth prospects. (http://on.wsj.com/1uEAX3J)

* Blackstone Group LP is nearing a deal to buy Royal Dutch Shell PLC's half-interest in the Haynesville Shale, a huge Louisiana gas field, in a deal that could value the stake at more than $1 billion. (http://on.wsj.com/1A6y3rf)

* Widespread use of commercial drones is likely to take significantly longer than many proponents of the budding industry anticipate, according to U.S. and Canadian aviation regulators. (http://on.wsj.com/1oVnkfs)

* U.S. factories that were idled during the recession are now humming with activity. Office and apartment buildings have less empty space. Unemployment is falling, while wages and benefits are growing slowly. However, conditions aren't quite back to what was normal before the 2008 financial crisis. (http://on.wsj.com/1oVntPP)

* A summer of geopolitical unrest is rattling markets, but despite a recent downturn, investors' optimistic view of U.S. stocks has been largely unscathed. A wave of risk aversion has punished stocks and fueled the largest-ever retreat from junk bonds. Investors are contending with violence in Ukraine, Iraq and the Gaza Strip, along with news that Italy faces its third recession since 2008 and Germany's industrial production is slowing. Yet many fund managers say that unless the unrest increases and threatens the global growth outlook, the case for buying U.S. stocks appears stronger than that for bonds and many other assets. (http://on.wsj.com/1vw8v8d)

* The largest U.S. public pension plan is considering a dramatic retreat from some riskier investments, as it tries to simplify its $295 billion in holdings and better protect against losses during the next market downturn, according to people familiar with the matter. California Public Employees' Retirement System is weighing whether to exit or substantially reduce bets on commodities, actively managed company stocks and hedge funds, the people said. (http://on.wsj.com/1plYNRg)

* Citigroup Inc and Swiss-based trader Mercuria Energy Group are battling in a London court over payments relating to metals-backed financing arrangements in China valued at over $270 million. The case between Mercuria and Citigroup is one of several brought by companies scrambling to limit their exposure to potential losses after the Chinese government launched an investigation into allegations of loan fraud at the ports. (http://on.wsj.com/1A6zkyD)

* Hachette Book Group said Amazon.com Inc is motivated by profits and market share at the expense of authors and bookstores, as the companies' contentious contract talks over e-book pricing continues. (http://on.wsj.com/1kvmSoq)

* At least 2.2 million people have already watched "The Expendables 3." The problem for the movie's distributor, Lions Gate Entertainment Corp, is that its big-budget action movie doesn't open until Friday. (http://on.wsj.com/1A6m7G2)

FT

Hedge fund firm Brevan Howard is battling a court case filed by former trader Christopher Rokos, who is asking for his five-year non-compete to be overturned, so that he can launch his own hedge fund.

The tensions between Russia and the west over Ukraine will not derail Austrian energy group OMV AG's plans to extend Gazprom OAO's South Stream gas pipeline from the Hungarian border to Vienna, and any delays would be manageable, Chief Executive Gerhard Roiss said.

South Africa's central bank has placed African Bank Investments under curatorship, as it announces a rescue plan for the lender of unsecured loans that involves a capital injection of nearly a $1 billion.

High-frequency traders in London are increasingly quitting investment banks in favour of specialised trading firms, as they try to escape tighter restrictions on pay and the looming threat of new regulations banning proprietary trading.

Proposals under consideration by the International Accounting Standards Board (IASB) to limit how pension surpluses can be booked, if enforced, could result in more than 25 billion pounds ($42 billion) being wiped off the balance sheets of UK's biggest companies.

The criminal investigation into former traders of the Royal Bank of Scotland Group Plc over Libor manipulation could spill over into next year, with the Serious Fraud Office requesting UK's financial regulator to postpone publishing its civil findings against at least two of the traders.

NYT

* Buzzfeed, the viral media site will use a $50 million investment to diversify its content, expand its video arm and create an in-house incubator for new technology. (http://nyti.ms/1sEgJWf)

* It is not clear to the executives of Microsoft Corp how the Chinese authorities believe that they violated the country's antimonopoly law. For months, Microsoft was in private discussions over competition issues with the State Administration of Industry and Commerce. (http://nyti.ms/1sM20dW)

* Pipeline group Kinder Morgan Inc, will acquire its three associated companies and re-form as a traditional corporation worth $140 billion. (http://nyti.ms/1A6xo9l)

* Hedge fund investors, furious at having their bond holdings in Portugal's Banco Espírito Santo written down to zero, are weighing legal action against Portuguese regulators. (http://nyti.ms/1oo6Ygv)

* SafeNet is selling itself for $890 million to Dutch digital security company Gemalto NV. The deal shows the limitations of a possible ban on inversions. (http://nyti.ms/1oCwsB2)

* The Royal Bank of Scotland Group PLC is revamping its controversial unit that assists businesses facing serious financial difficulties, according to a person briefed on the matter. The unit, the Global Restructuring Group, will be disbanded and replaced by a new restructuring group to be headed by Laura Barlow, who joined the bank in 2009, said the person. (http://nyti.ms/XUVeXQ)

China

CHINA SECURITIES JOURNAL

- China has made its first effort to coordinate property registration in urban and rural regions to help protect farmers' rights and improve the government's efficiency. Such registration has been divided because of administrative turf.

- China's monetary policy is not likely to be further loosened in the second half of this year compared with the first half as the government's targeted easing has checked the slowdown in the country's economic growth, the newspaper said in a commentary.

SHANGHAI SECURITIES NEWS

- Zhengzhou became the latest Chinese city to lift property controls to support a cooling market and help safeguard the country's economic growth.

- China has nearly completed a clean-up of regional equity trading venues and regulators are set to issue new regulations to govern local stock trading practices before the end of this year.

- China's police plan to put greater focus on investigating emigrants who have obtained citizenship abroad but have not cancelled their Chinese household registration, as part of government efforts against graft.

PEOPLE'S DAILY

- The disciplinary commission of the ruling Communist Party of China has opened a special web page for citizens to inform about officials using public funds to send moon cakes as gifts during the forthcoming Mid-Autumn Festival, in the party's latest move to fight against corruption.

- Transit of Russian oil and gas to the European Union could be affected by a bill Ukrainian parliamentarians are planning to pass on August 12. The new legislation is aimed at halting the activity of 65 Russian companies operating in the country.

- US oil major ExxonMobil and Rosneft started joint drilling of a well on Saturday in an offshore oilfield of Russia's Kara Sea in the Arctic.

- Sales of new cars and light commercial vehicles in Russia fell by almost 23 percent in July and reached the level of 2010.

- Russia will boost the production of Tupolev-204SM medium-range airliners to compensate for the problems of Dobrolet discount airline hit by sanctions.

- Russia's defence ministry has dismissed accusations of planning to use troops to accompany humanitarian aid to Ukrainian civilians in the zone of military activity.

- Russia's businessmen are proposing that the Finance Ministry raise profit tax to 9 percent from the current 5 percent, for subsidiaries in Cyprus, the Netherlands, Switzerland and Luxembourg of Russian companies outside the energy and banking sectors, which could increase tax revenues from these companies by 70-80 percent.

- Western sanctions are threatening Rosneft's plan to create its own oil trading business, the daily says, after Italy's Saras halted negotiations on the formation of a trading joint venture after the Russian state oil major was hit by the sanctions.

- Four Russian parliamentarians from the Just Russia party could face a ban on leaving Russia because of unpaid taxes, the daily says, adding that their joint tax debt has reached 10.4 billion roubles.

Britain

The Times

PRESSURE ON BALFOUR TO RESUME DEAL TALKS

Balfour Beatty Plc will reveal this week that it is still hoping to sell its Parsons Brinckerhoff subsidiary as it tries to convince investors that it can survive without Carillion Plc.

MONARCH HAS RYANAIR AND EASYJET IN ITS SIGHTS

A wide-ranging review of the travel group behind Monarch may result in a sale of the budget airline. The strategic review is exploring the budget carrier's ownership, financing and operations as it seeks to mount a challenge to easyJet Plc and Ryanair Holdings Plc.

The Guardian

APPEAL COURT BATTLE BREWS OVER GREENE KING TAX AVOIDANCE SCHEME

Greene King Plc is to take its long-running battle to prove the legality of a controversial tax avoidance scheme to the court of appeal despite two defeats in the lower tax courts and condemnation from a Treasury minister and other MPs.

The Telegraph

ALEX SALMOND ADMITS THERE IS NO PLAN B AS HE INSIST SCOTLAND WILL KEEP POUND

Alex Salmond has ignored opinion polls and growing signs of discontent inside his own party by insisting that an independent Scotland would keep the pound "come what may".

PUNCH DIRECTOR CLOSES IN ON RESTRUCTURING WINDFALL

Steve Dando, Punch Taverns Plc's finance director, is in line for a bonus worth up to 275,000 pounds as a reward for concluding the pubs group's tortuous debt restructuring, which will enter the final furlong this week when proposals for a debt-for-equity swap are formally launched.

CROWN ESTATE FENDS OFF FOREIGN BIDDERS TO BUY SLICE OF MAYFAIR FROM CHURCH OF ENGLAND

The Queen's property company has teamed up to buy a 64.2 percent slice of prime Mayfair estate, it was announced on Sunday. The deal saw the Crown Estate partner with Norway's sovereign wealth fund to add a stake in nearly 400-year-old Pollen Estate to its portfolio, a plot of land that had belong to the Church of England.

Sky News

HUNTSWORTH BOSS TO STEP DOWN AFTER PAY REVOLT

Conservative peer Lord Chadlington who heads public relations groups Huntsworth Plc is to step down weeks after a major revolt by shareholders over his pay package.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

No significant domestic economic reports scheduled for today.

ANALYST RESEARCH

Upgrades

Achillion (ACHN) upgraded to Outperform from Market Perform at Wells FargoAchillion (ACHN) upgraded to Overweight from Neutral at Piper JaffrayCentral European Media (CETV) upgraded to Neutral from Sell at GoldmanChuy's (CHUY) upgraded to Outperform from Market Perform at Raymond JamesFrank's International (FI) upgraded to Neutral from Sell at GoldmanGNC Holdings (GNC) upgraded to Outperform from Neutral at Credit SuisseGulfport Energy (GPOR) upgraded to Buy from Hold at StifelHanger (HGR) upgraded to Buy from Neutral at SunTrustHuntington Ingalls (HII) upgraded to Buy from Neutral at UBSHyatt Hotels (H) upgraded to Buy from Hold at StifelPepsiCo (PEP) upgraded to Buy from Neutral at UBSSouthwest Gas (SWX) upgraded to Buy from Hold at Brean CapitalTesla (TSLA) upgraded to Buy from Hold at Deutsche Bank

Downgrades

2U (TWOU) downgraded to Neutral from Buy at GoldmanCrestwood Equity (CEQP) downgraded to Market Perform from Outperform at Wells FargoFairway Group (FWM) downgraded to Market Perform from Outperform at William BlairKing Digital (KING) downgraded to Sector Perform from Outperform at Pacific CrestOshkosh (OSK) downgraded to Neutral from Overweight at JPMorganWal-Mart (WMT) downgraded to Hold from Buy at Jefferies

Initiations

CareDx (CDNA) initiated with a Buy at MizuhoCareDx (CDNA) initiated with an Overweight at Piper JaffrayMavenir Systems (MVNR) initiated with an Outperform at CowenRoka Bioscience (ROKA) initiated with an Outperform at LeerinkTRI Pointe Homes (TPH) resumed with a Buy at CitigroupiRadimed (IRMD) initiated with a Buy at Roth Capital